On Becoming Self-Employed – Part 2
Posted by Gail | Filed under Good ideas
One of the reasons why I became self-employed was because I was just too different to make it work in corporate land. I kept getting fired. First, I can’t stand fools, and the idea of sitting around a boardroom table listening to monkeys chatter holds no appeal. That’s not to say that self-employment totally eliminated the monkeys. It just reduced my exposure enough to keep me sane.
Some people can’t get over the hump on the self-employment idea simply because they can’t imagine how they’d do it. This is one of the things my friend Tasha is facing right now. With so many big steps to take, she’s quivering at all the places where she can mess up. But if you focus on what can go wrong, you’ll scare yourself right out of a great opportunity. You must deal with the things that are causing you to be fearful and then put it away and get busy.
Ask yourself: what’s the worst that can happen?
Might you lose everything? Have to declare bankruptcy? Have to put having a family on hold? Hey, you could lose everything if you lose your job and can’t find another (a real likelihood in today’s economy) so that shouldn’t stop you. And the way to avoid this outcome is to have a good plan in place so you can check your progress and your downsides to keep you honest.
Years ago I tried my hand at the magazine publishing biz. I learnt a lot, had a great time, and lost some money. The important thing was that I had the money to lose… it wasn’t credit… and I set a marker for how much I was prepared to lose before I threw in the hat. When I hit that marker, I closed up shop. But I was a smarter, better business person for having had the experience. And I don’t ever wish I hadn’t done it. Yah, it would have been nice to make it fly, but that wasn’t to be. So I took what I learned and moved on.
Not everything you try will work the first time. Some things need tweaking. Some things need time. And some ideas need to be scrapped completely. If you have a stash of cash handy to see you through, you’re much more likely to succeed. That may mean keeping your day job while you launch your new enterprise. Or it may mean taking on a biz partner so you share the costs of the new start up. Whatever it takes that’s what you do if you’re serious about being successful.
Ultimately, you may have to take another job and save up to try again. Hey, been there, done that.
One of the best ways of getting your new enterprise off the ground is to start small and stay lean. It’s pretty well known that approximately 80% of new small businesses in Canada fail within the first five years, in no small measure because of a lack of money. And while you may think you need every new toy under the sun to make the biz go, that’s often not true. One of the reasons why women are more likely to be successful is that they are willing to do everything themselves: do the work, cut the invoices, pay the bills, clean the toilets. The fewer your bills, the less revenue you initially need to survive, and the more flexibility you have to change as you need to. So don’t start with a lot of expenses. Start small, and keep your expenses as low as you can.
One of the smartest things Tasha has done is build a business plan for her new start-up. A boat without a rudder will just drift so one of the most important resources to get you off on the right foot by helping you to think things through is a business plan. If you’re not prepared to invest the time and effort to map out your new business forgedaboutit. Once you’re off and running, most of your business decisions will have to be made quickly on a reactive day-to-day basis. You better have the big picture firmly in mind so you do go off half-cocked. The Government of Canada offers an online small business workshop and websites abound that can help you to create a plan. Find a format you think is applicable to your new endeavour and get busy planning.
There are a bunch of skills you need to have, aside and apart from what you’re primary skill you’re trying to sell to the world. Whether you’re knitting a new kind of self-warming mitten, introducing your Grandma’s Pickles to the community, or opening up shop as the next great web designer, you’ll also have to understand how receivables and payables work, when you must file your GST and how often it makes sense to reconcile your chequebook. Hey! Those are some pretty useful skills in life too. Get busy learning!
October 29, 2009 at 7:02 am
Excellent and practical advice here Gail. I’d also suggest get a good accountant. It’s amazing how many things you can write off when you have a business – helping you to ultimately keep more of the funds you make.
To stick with the business plan (or tweak it when need be) I found it helped to have a network of supportive business minded folk. Maybe even a small ‘board of directors’. For me it was my husband and a mentor in the same field I was in. It helped me feel less alone and gave me outside, wise, sounding boards to bounce my ideas off of.
October 29, 2009 at 7:11 am
I’ve always found writing a business plan to be hard. I’ve had some interesting ideas for businesses, but it’s sitting down and writing that business plan thats hard to do. I’m also not crazy so I haven’t actually took the plunge to start these businesses, because I don’t have a business plan.
I have absolutely no idea how to write a business plan.
October 29, 2009 at 8:58 am
Well I wouldn’t just credit with women being more successful at it.
Thats just not so.
I have seen lots of dumb business people of both sexes!!
Seen lots of smart ones to both sexes!!
I did it as a male successfully for over 25 years and got out of running my own business while the gettin was good.
Running a business today is much harder and more red tape on just about every aspect.
Think not?
I beg to differ…go open a government regulated business and find out!!
Sure the government has lots of resource material on starting your own business………. they stand to make the most money off it!!!
And the red tape!!!
Wait’ll you have to deal with workmens comp. GST payments receiver general ont sales tax various government departments
The best people to open businesses are those leaving a job with a good pension and “retired” from that job.
They have the pension to live on and can play at the business to see what goes.
October 29, 2009 at 9:46 am
Jason – there’s software out there to help you write a business plan, check them out.
Gail — thanks for lighting the fire under me to get something cooking parttime (I’m not ready to leave my comfy fulltime job yet)
g
October 29, 2009 at 9:49 am
John it’s not as hard as your making it out to be, though Workers comp is trying our patience with their newest rule. Company owners will now be required to be insured through WC (if they do any of the physical work) where before they could take out private disablility insurance which is much cheaper then through WC.
The inusrance companies are fighting the new ruling of course, as they stand to loose a LOT of policies.
True there is not a lot of money to be made if you intend to stay a small business, and there are no sick days paid, no paid vacation time. It is not impossible though to be self employed.
My husband has been a self employed Electrical Contractor for over 21 years now (after leaving the Electrial co he had been with for 18 years)
I became a self employed Children’s Book Illustrator & Cartoonist about 10 years ago. Of course, I had no choice really, not many people out there that hire illustrators:)
For me, it has turned out to be the best thing ever. Collecting and filing GST is not that big a problem. My accountant does most of the paper work anyway.
As Doreen says, a good accountant is most important. Not so much for helping to save you money in deductions but to keep you honest, curb your impulse to try and deduct everything and thus, when an audit comes around (as it often does with trade contractors) your not going to jail, nor owing anything. Legit self employed deductions are not as many as most people think.
October 29, 2009 at 10:07 am
Hi Gail and everyone else! I just wanted to thank you about posting about a business plan! At my day job I work helping medium to large businesses grow or fix areas in their business that needs some attention. Anything from sales and marketing to HR issues and computer systems.
I just want to say to everyone out there it doesn’t matter how big or small your business is, believe me, if you don’t have a plan..you don’t have a clue. Some of my clients are multi million dollar companies, that because of not having a plan, often make reactive choices instead of informed planned ones. This can cost big, in both time and money.
I know writing a business plan sounds really complex but it doesn’t have to be. It doesn’t need to be a novel, there are plenty of business plans that I have reviewed that are 20 pages and perfect for what they need.
My suggestion is to break out the parts of a business plan out, schedule sometime each week to work on that part and when you are done have a few friends look for holes or ideas you may have missed. These people can help you feel accountable about finishing each section on time and help to encourage you if you hit a road block.
That is all for now! Happy writing everyone!
October 29, 2009 at 10:08 am
The comment about tax deductions and how they can free up $$ made me think of a my sister and brother in law who ran their own business and almost lost everything.. they bought all kinds of things they couldn’t even begin to afford because they could deduct it.. they couldn’t seem to wrap their head around the fact that the deduction did squat for them if they couldnt afford what they were purchasing and had to buy it on credit.. my sister in law refused to get a job to help the family finances for years becuase then her husband couldn’t claim her on his taxes…. I don’t think they ever took the time to figure out that as long as she made more than the spousal deduction she was actually bringing in money.. self employment is not for the weak hearted or the people with their head buried in the sand..
October 29, 2009 at 10:20 am
@ Hapilly:
Re: Self employment is not for the weak hearted or the people with their head buried in the sand..
You can replace “self employment” with “life” and your sentence makes the same amount of sense.
I’d hesitate to say it was trying to be an entrepreneur that caused the heartache, it was incompetence.
October 29, 2009 at 10:22 am
An excellent post Gail. Most things in life work better when you have a plan. Like picking a career that requires post secondary education. If you’re going to invest the time and money while not making any money you want to know that there are excellent employment prospects at the end, making a good wage, and the working hours and conditions are something you could live with.
I’m like you Gail, I can’t stand dealing with fools. This is what is motivating me to find something I can do from home once my mat leave is over. I have had many jobs over my lifetime and I know a lot of what I don’t want so this helps to narrow the field. I am also quite lucky to have a good job to return to if this doesn’t work out.
Something I have learned is that reward is not proportional to effort. It is proportional to effort of something you believe in.
October 29, 2009 at 10:36 am
PLEASE TELL how to find a good accountant. We need one for personal tax planning/preparation.
Gail, I agree with your monkey assessment. Hell would be a room full in a forever-meeting.
October 29, 2009 at 11:34 am
@ geoff..
not sure but I think you missed my point.. burying your head in the sand is never a good way to live but since we are talking about being self employed my point was that being self employed isn’t just “hanging out your shingle” and sitting back and watching the money roll in… self employment has many great benefits but as other posters alluded to their comes sacrifices to get those benefits…. not sure that every self employed person out their is fully aware and accepting of those sacrifices.. I would bet that a large number of people that walk away from being self employed became disallusioned when all of the sacrifices became greater than the benefits…
October 29, 2009 at 12:25 pm
Great post and I agree about start small, stay lean. These two points were relatively easy for me – as a freelance copywriter as setting up shop was fairly simple.
I also believe that having cash reserves in anticipation of a slow growth phase was essential. It may take time some time to establish yourself, and if you’re faced with financial pressures, you could be forced to throw in the towel…when you might be on the verge of success! Starting off on a part-time basis can help with that – both in terms of building up revenue and creating a portfolio/network.
October 29, 2009 at 12:32 pm
LOL! I commented yesterday about why I was motivated to start my own business but didn’t want to mention the fact that I have a big mouth and will call a spade a spade. Doesn’t go over well in the touchy feely field I was trained and working in. I’ve been fired a few times because of this.
I’m just now developing a business plan and seeing the necessity of them. I’ve always had an idea of where my business needs to grow, needs work on etc, but there are some areas that I go overboard in and I think a plan will help keep that in check.
October 29, 2009 at 12:35 pm
Its not as easy as its made out to be either.
And it depends on the business you are in.
If it was so easy there must have been a lot of dumb business people who have got out of businesses closed in the last few years.
I think not.
You have to figure everything you are doing to do with the business and the time involved in doing it
I can gurantee you that most one person business people never do that!!
And driving around in a truck with some wire, mars connectors, electrical boxes and a ladder is hardly an expensive business to run.
My relative does the same.
He doesn’t even need a shop so no overhead there.
BUT if you are going to run a businesss with a few emplyees, stock etc its is much different than it was years ago.
Especially if you have a ministry of labour inspector do a spot audit.
If you are going to be a one person busineess then thats okay to but you never leave the business either.
Its alway there around you…..been there done it.
And hope you never get sick, let alone a vacation
Some of these businesses you just can’t shut down if you do it alone or you loose the customers.
But hey different strokes fo different folks
October 29, 2009 at 12:41 pm
Before my husband had his midlife crisis and went back to school and changed our lives forever he worked for a large bank as a small business (mostly self employed single proprietorship) consultant. His job was to go into small businesses and analyze what they were doing wrong. He hated this job because he saw so many disasters. To this day he still carries the memories (and burden) of wonderful people who had dreams and passions but no clue as to the business side of things and instead of finding their bliss they found trouble and failure. Just because an engineer loves cameras and photography does not mean he should own a camera shop. Just because Aunt Marie is the best cook on the face of the earth does not mean that her husband should open a restaurant. Just because Kim is your best friend since kindergarten doesn’t mean you should open a flower shop/landscaping business together – especially when she has hay fever. My husband’s number one and two questions to his bosses always seemed to be “what were you thinking to loan this person any money at all let alone tens of thousands of dollars” and “why didn’t you send them a consultant when they were starting out instead of when they were already up to their assets in alligators?”
No one should ever consider starting a business or being self employed without first taking basic business courses. You can hire people to do almost anything for you but if you don’t understand what they are doing you are headed for heartache, tears and penury.
I have been self employed for many years and I both love and hate it. I have been successful – but just. There are many perks but many, many challenges and frustrations. Not every one is suited to self employment. And by this I don’t mean that you are dumb or incompetent. We all have our strengths but also our weaknesses. A lot of these can be improved upon through education and experience but not all. My Dad was a mathematician and yet was unable to ever balance the cheque book. A character flaw – he just didn’t care because he had bigger equations to think about. Thankfully Mom left school at sixteen to managed her family business so she took care of everything and we didn’t starve.
I can do the math (good thing since I am a bookkeeper) and am able to sell myself but my people skills still leave a lot to be desired. I doubt that there is much chance of improvement (old dog, new tricks, bad attitude etc) since I fundamentally believe that Hell is having to deal with other people and their money. Probably why I admire Gail so much.
To be self employed you cannot JUST be good at whatever it is you do. You have to become a split personality multitasking super hero. Do what you do and also be a bookkeeper, salesman, advertising exec, customer service rep, human resources officer, financial planner, operations manager, etc. etc. etc. It is a big decision to leave the safety of regular employment and an even bigger job to actually do everything that is involved in being self-employed. To be successful you have to be willing to work 25/8. Unfortunately walking the dog and watching Oprah, Dr. Phil, Dr. Oz and ‘Til Debt takes up four and a half hours of my day so I am already always running behind.
October 29, 2009 at 1:59 pm
to those who don’t know where to start…I had help from my YMCA Entrepreneur center-for free and on my time! They were awesome and very encouraging. If someone has criticism (positive or negative) take it into consideration (of course consider the source…) and I can’t stress enough – RESEARCH! If you need suppliers – don’t be scared to ask for references or check the better business bureau or whatever you have to do to make sure THEY are legit!…can you tell I had a crappy supplier who was trans-shipping?? – brutal! I’m not saying don’t do it, but go and talk to someone before doing it…there is help out there you just have to go and find it!
To Gail – I hope there will be more posts about this stuff – esp about cash flow management…look forward to reading more! Thanks!
October 29, 2009 at 6:15 pm
Maureen; You made me laugh at the TV show times taking up 4 1/5 hours! When the slow season starts in my work, I can get hooked on a different routine or LONG lunches in front of the TV and visiting my sister on her days off. Then when the business picks up again, I have to really work at disciplining myself again to get it done! (And my poor sister has to get used respecting the fact that I do work even if I am at home).
October 29, 2009 at 9:10 pm
@Jason – you can get cheaper, even free, help writing up a business plan by contacting your local post-secondary institution. Business students have to write several as assignments. Here in Edmonton, you could contact NAIT.
October 30, 2009 at 8:06 am
And driving around in a truck with some wire, mars connectors, electrical boxes and a ladder is hardly an expensive business to run.
My relative does the same.
He doesn’t even need a shop so no overhead there.
John, that’s not legal. You must be a licensed Electrical contractor to conduct a business (above ground) in Canada. You have to hold a masters or employ someone that does. You must pay upwards of $600 a year to operate a company (masters fee and license through ESA)
You must take out permits, you must charge GST (and soon the Harmonized taxes, which will sadly push a lot of people underground, cash jobs, no inspections, just electricians working on the side as clients will not want to pay this extra cost)
Still must collect EI, CPP,FD and PR taxes and submit each month to the Reciever General. GST every 3 months.
You must carry liablility insurance of $2 million (to qualify for the license), you must have insurance on your trucks and even with one electricain or apprentice in your employ, pay into workers comp, plus be in good standing. You must send your employee’s for yearly training in fall protection etc.
You are not allowed to just drive around in a truck, not as a real electrical contractor at least. A handyman perhaps, but he’s not allowed to touch electrical (though we all know they do:)
October 30, 2009 at 8:10 am
Opps, forgot the overhead costs, which include yellowpages, office phone, fax, cell phones, computer/printer for invoicing, gas for trucks, cost of trucks and repairs, office space, the list goes on and on.
I wish it was as simple (and legal) to just drive around and operate out of a truck, we would be rich if you could!!!!:)
October 30, 2009 at 8:06 pm
Hmm interesting..What I was trying to point out originally
First it was me making it harder than it was being self employed..now you are claiming you wish it was so simple!! listing all the issues
Yes you can operate legally if you have your business at your house.
And you follow a few basic rules
Nothing not right about that.
Yes there is a few fees they’ve been there for years.
truck insurance and liability insurance its not that bad if you never had any claims.
Computer and printer all that jazz buy it through the business, if you have the business at home or office written off thru the house it can be a legitimate writeoff and you can also use it for yourself for “free” at home.. the shop bought it.
But you still don’t have to tie up much capital in stock or a shop unless you choose to.
If you work alone you don’t have to pay ei either and currently no benefit to do so.
there is a item or two you can also legally not have to do but you have to file forms for that
PS: I never saw or met an electrician(or any mechanical tradesman!!) who took permits out eveywhere either.
Or didn’t work for cash somewhere
If you believe that then put a tooth under your pillow for the tooth fairy!
Their wives or live ins don’t even know what they make really.
If you are advertising in the yellow pages, unless just a number listing you better chop that fat its a waste of money
If you are good they, customers will find you.
October 31, 2009 at 12:19 am
My father has owned his own construction management business for almost 25 years. I definitely agree that it’s no walk in the park. I remember him being up late most nights working on quotes, looking over drawings, and doing many things I still barely understand. The wealth of knowledge he’s required to have is incredibly vast. He’s highly motivated and responsible with money, and is not afraid to work long hours, even at the tedious stuff. That’s exactly the kind of person that can succeed at keeping a small business going.
And he has.
But my parents didn’t put all their eggs in one basket, either. They’ve had other investments all the while, always making sure that there was a self-made safety net should the worst happen. My parents are very wise people, and have done incredibly well for themselves despite starting out “without a pot to pi__ in,” as my dad is wont to say.
Anyway, I’ve really enjoyed these posts and the responses!
March 17, 2010 at 5:17 am
What are copywriting classes like? I am thinking about minoring in copywriting at my school (I’m a fiction major) and I’d to know what sort of things are taught, what kinds of homework/practice/exercises there are, etc. Anybody here with experience?